Investment losses were steep across the board during the Great Recession, but the downturn was especially hard on retirement accounts.

Pension funds, which primarily pay for the retirements of public-sector and manufacturing workers, lost hundreds of billions. State revenues fell from $1.6 trillion in 2008 to $1.1 trillion in 2009. The California Public Employees' Retirement System, one of the nation's largest, fell more than 25 percent, from $260 billion in October 2007 to $160 billion in March 2009.

[See 10 Places to Retire on Social Security Alone.]

Individual 401(k) accounts were also hit hard. According to Hewitt Associates, the average investor lost $10,000 in retirement savings in 2008. Fidelity reported that investors lost an average of $19,000 that same year. These losses caused many to postpone their retirement in order to save more.

At the same time, the future of Social Security is in serious doubt. According to recent reports, the Social Security disability program's trust fund, a program that supports people with disabilities and their families, will run out of money in 2016. In April, the federal government warned that all of Social Security would be insolvent by 2024 unless drastic changes are made to how the program is administered. Few believe that a deadlocked Congress will make any progress on improvements to the program.

"There's a great amount of skepticism when it comes to Social Security and government benefits," says Dave Vick, president of Vick & Associates, a company that teaches classes on financial planning. "There's a whole group of people who love those benefits who blindly believe it's not going to change. There's a whole group of people who refuse to believe the reports that Social Security is going to become insolvent," he says.

According to Vick and other retirement experts, steep losses in pension funds and 401(k)s are causing Americans to rethink the way they are planning for retirement. New investment instruments are being developed that provide more income security and make payouts in different ways. Without these new instruments, experts warn that many Americans will be ill-prepared for retirement.

[See 10 Ways to Boost Your Social Security Checks.]

Loss of faith in retirement traditions. Jerry Kalish, president of National Benefit Services, a firm that serves as a third-party administrator of pension plans, says the recent downturn has left the majority of Americans--not just older Americans close to retirement--unable to meet their retirement savings needs.

"As a country, we are woefully unprepared for retirement. Defined-benefit pension plans are, for all purposes, gone. A lot of them are frozen, meaning there are no benefits accrued and most are underfunded. It really leaves 401(k) plans right now," which suffered losses during the recession, Kalish says.

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Investors Seek Nontraditional Retirement-Savings Options